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RXO, Inc. (RXO)·Q2 2025 Earnings Summary

Executive Summary

  • EPS beat and revenue slight miss: Adjusted diluted EPS of $0.04 vs S&P Global consensus ~$0.026; revenue $1.419B vs ~$1.435B. Bold EPS beat, slight revenue miss; margin improved with Brokerage gross margin at 14.4% and company gross margin 17.8%. *
  • Operational momentum: Brokerage volume +1% y/y driven by LTL +45% (TL −12%); TL gross profit per load rose 7% sequentially; adjusted free cash flow conversion ~58%.
  • Q3 outlook: Adjusted EBITDA $33M–$43M; Brokerage volume ~flat y/y; gross margin 13.5%–15.0%; FY25 modeling assumptions largely maintained with modestly lower stock-based comp.
  • Integration synergy execution: Early benefits from unified carrier/coverage operations; ERP consolidation completed; technology integration targeted substantially complete by end of Q3.
  • Potential stock reaction catalysts: EPS beat, sequential margin and FCF conversion improvement, and clarity on Q3 margin outlook despite soft freight demand. *

What Went Well and What Went Wrong

What Went Well

  • Brokerage outperformed the market: Volume +1% y/y with LTL +45% offsetting TL −12%; Brokerage gross margin 14.4%. “We’re seeing early benefits from our newly combined carrier and coverage operations.” — CEO Drew Wilkerson.
  • Productivity and cash generation: Robust brokerage productivity gains (+18% loads per person over LTM), adjusted free cash flow conversion ~58% in Q2; cash balance increased sequentially.
  • Complementary services strength: Last Mile stops +17% y/y (fourth consecutive quarter of double-digit growth); complementary services gross margin 22.8% (+180 bps q/q).

What Went Wrong

  • Overall gross margin contracted y/y: Company gross margin 17.8% vs 19.0% in Q2 2024; adjusted EBITDA margin 2.7% vs 3.0% y/y.
  • Continued soft freight demand: Market tightening was supply-driven (capacity exits); demand remained soft; July industry KPIs moved seasonally lower.
  • GAAP profitability impacted by integration/restructuring: GAAP net loss of $9M; transaction, integration, restructuring and other costs, plus amortization, impacted GAAP EPS by $0.09, net of tax.

Financial Results

Headline Metrics (YoY and QoQ trajectory)

MetricQ2 2024Q1 2025Q2 2025
Revenue ($USD Billions)$0.930 $1.433 $1.419
Gross Margin (%)19.0% 16.0% 17.8%
Adjusted EBITDA ($USD Millions)$28 $22 $38
Adjusted EBITDA Margin (%)3.0% 1.5% 2.7%
GAAP Net Income ($USD Millions)−$7 −$31 −$9
Diluted EPS (GAAP) ($USD)−$0.06 −$0.18 −$0.05
Adjusted Diluted EPS ($USD)$0.03 −$0.03 $0.04

Actual vs Wall Street Consensus (S&P Global)

MetricQ2 2025 ActualQ2 2025 ConsensusSurprise
Adjusted/Primary EPS ($USD)$0.04 $0.026*Beat (+$0.014)
Revenue ($USD Billions)$1.419 $1.435*Slight miss (−$0.016B)

Values retrieved from S&P Global.*

Segment Revenue and Gross Margin

SegmentQ1 2025 Revenue ($MM)Q1 2025 GM %Q2 2025 Revenue ($MM)Q2 2025 GM %
Truck Brokerage$1,067 13.3%$1,025 14.4%
Last Mile$278 —$315 —
Managed Transportation$137 —$142 —
Complementary Services (LM + MT)$41521.0%$45722.8%
Eliminations$(49)—$(63)—
Total$1,433 16.0% $1,419 17.8%

KPIs

KPIQ1 2025Q2 2025
Brokerage volume y/y−1% +1%
LTL volume y/y+26% +45%
TL volume y/y−8% −12%
TL contract/spot mix73% / 27% 73% / 27%
TL revenue per load y/y+4% (ex-fuel/LOH) +3% (ex-fuel/LOH)
TL gross profit per load (seq.)Relatively stable vs Q4 +7% seq.
Complementary services GM (q/q)21.0%22.8% (+180 bps q/q)
Adjusted FCF conversion27% (TTM 3-mo) 57.9% (Q2)
Net debt ($MM)$407 $403
Gross/Net leverage (LTM bank-adj. EBITDA)2.0x / 1.9x 2.2x / 2.1x

Guidance Changes

MetricPeriodPrevious Guidance (Q1 2025)Current Guidance (Q2 2025)Change
Adjusted EBITDA ($MM)Q3 2025—$33–$43 New
Brokerage volume y/yQ3 2025—~Flat New
Brokerage gross margin (%)Q3 2025—13.5%–15.0% New
Capital expenditures ($MM)FY 2025$65–$75 $65–$75 Maintained
Depreciation ($MM)FY 2025$65–$75 $65–$75 Maintained
Amortization of intangibles ($MM)FY 2025$45–$50 $45–$50 Maintained
Stock-based compensation ($MM)FY 2025$30–$35 $28–$32 Lowered
Restructuring/Transaction/Integration ($MM)FY 2025$40–$50 $40–$50 (2H down vs 1H) Qualitative improvement 2H
Net interest expense ($MM)FY 2025$32–$36 $32–$36 Maintained
Adjusted effective tax rate (%)FY 202530%–33% 30%–33% Maintained
Diluted shares (MM)FY 2025~170 ~170 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2: Q4 2024)Previous Mentions (Q-1: Q1 2025)Current Period (Q2 2025)Trend
Technology integration (Coyote)Raised cost synergy target to ~$50M amid integration progress Carrier/coverage migration complete; expect >$70M cash synergies; unified CRM & payments; early PT (purchase transportation) benefits ERP consolidation complete; customer migration begun; technology integration substantially complete by end of Q3 Improving execution; expanding synergy scope
Brokerage margin drivers—GPPL improved ~20% Jan→Mar via buy-side; expect sequential margin improvement in Q2 TL GPPL +7% seq.; contract rate increases phasing in; effective capacity procurement; expect TL GPPL to increase slightly in Q3 Sequential improvement continues
LTL growth—LTL +26% y/y; stable GPPL; enterprise wins LTL +45% y/y; 32% of brokerage volume; strong contribution margin Accelerating share gains
Macro/tariffs & demand—Shipper uncertainty; April TL volume down mid-single digits m/m; tariff-related inventory strategies Demand soft; supply-driven tightening; KPIs moved seasonally lower in July; still too early to call peak season Mixed; demand soft, capacity exiting
Free cash flow—Adj. FCF conversion 27% (TTM 3-mo) Adj. FCF conversion ~58%; expect strong conversion in Q3 Strengthening
Capital allocation—Strong liquidity; balanced capital allocation philosophy $125M repurchase program; robust liquidity (cash + revolver $583M) Optionality increased

Management Commentary

  • “RXO executed well in the second quarter despite the prolonged soft freight market… We’re seeing early benefits from our newly combined carrier and coverage operations, and we delivered Brokerage gross margin of 14.4%… Last Mile achieved 17% stop growth… Our cash performance in the quarter was strong, and we increased our cash balance sequentially.” — Drew Wilkerson, Chairman & CEO.
  • “The actions we’re taking now are yielding results in the short term and positioning us well for the long term… scale, combined with our cutting-edge technology, is driving productivity improvements… uniquely positioned to deliver increased earnings power and free cash flow over the long term.” — Drew Wilkerson.
  • Integration milestones: “ERP consolidation successfully completed… Customer migration has already begun… anticipate technology integration to be substantially complete by end of Q3.”

Q&A Highlights

  • Peak season and macro: “It’s still too early to call what happens on peak season… a little bit more clarity on tariffs… confident in our ability to grow EBITDA from Q3 to Q4.” — Management on macro/peak-season uncertainty.
  • Margin trajectory: Q3 guidance implies continued margin improvement despite soft demand; TL GPPL improved and expected to continue rising modestly.
  • Purchase transportation benefits: Early wins from unified carrier/coverage operations; expect further capacity procurement efficiencies.
  • Guidance clarity: Q3 adjusted EBITDA $33–$43M; Brokerage volume ~flat y/y; gross margin 13.5%–15.0%.

Estimates Context

  • EPS beat vs consensus ($0.04 vs ~$0.026), driven by better gross margins and integration-driven productivity; revenue slightly below consensus ($1.419B vs ~$1.435B). Values retrieved from S&P Global.* *
  • Consensus breadth: ~18 EPS estimates and ~15 revenue estimates underpin Q2 2025 consensus. Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Bold EPS beat and sequential margin/FCF improvement despite soft demand; near-term setup benefits from contract rate increases and integration-driven buy-side efficiencies. *
  • LTL brokerage is a structural growth lever with strong contribution margin, supporting higher gross margin percentage mix over time.
  • Integration progress is tangible (ERP, coverage), with Q3 tech completion targeted; expect continued PT savings and productivity gains.
  • Q3 outlook is prudent yet constructive (EBITDA $33–$43M; GM 13.5%–15.0%); watch for TL GPPL sequential uptick and strong FCF conversion as potential near-term stock catalysts.
  • Liquidity and leverage remain solid (gross/net leverage ~2.2x/2.1x; $583M total capacity), enabling balanced capital allocation including $125M buyback.
  • Risks: Persistent demand softness, tariff-related uncertainty, and automotive headwinds could weigh on TL volume and mix; management focused on PT discipline to offset.
  • Medium-term thesis: Scale plus AI-enabled technology should drive durable productivity, margin expansion, and multi-cycle FCF conversion (40%–60% targeted), with LTL/Managed Transportation diversifying earnings.

Additional sources and documents reviewed:

  • Q2 2025 8-K press release and investor presentation, including financial statements and reconciliations.
  • Q1 2025 8-K press release and slides for prior-quarter context (synergies, tech integration, KPIs).
  • Q1 2025 earnings call transcript (integration, margin drivers, LTL growth, tariffs).
  • Q2 2025 earnings call references (themes and select remarks via public transcript portals).

Values retrieved from S&P Global.*